Tag: investments

COVID-19 Crisis: Foreign direct investments spiked in April 2021 in connection to CREATE Law, economic reopening and other factors

COVID-19 Crisis: Foreign direct investments spiked in April 2021 in connection to CREATE Law, economic reopening and other factors

carlocarrasco

It’s been months since the last time I wrote about the Corporate Recovery and Tax Incentives for Enterprises act otherwise referred to as the CREATE Law. For the newcomers reading this, the CREATE Law was designed to cut down corporate income tax which should lead to the creation of new jobs and the attraction of investment in mind. The said law is really crucial in this COVID-19 crisis we are all still living with.

Recently, the Philippine News Agency (PNA) published an article stating that a huge rise of foreign direct investments (FDIs) in the country was realized this past April and the CREATE Law was one of the factors behind it.

To put things in perspective, posted below is an excerpt from the PNA article. Some parts in boldface…

An economist has attributed the rise of foreign direct investments (FDIs) in the country in April 2021 to the implementation of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) law and the opening of the economy.

The Bangko Sentral ng Pilipinas (BSP) on Monday reported the 114.4-percent year-on-year jump of net FDI inflows to USD679 million last April from USD317 million in the same period last year.

In a report, Rizal Commercial Banking Corporation (RCBC) chief economist Michael Ricafort said lower interest rates and lower cost of some inputs like real estate property and leases are plus factors that enticed higher FDIs.

“Some foreign investors may have started to come in view of the progress made on the CREATE law, which was finally signed on March 26, 2021 and reduces corporate income tax rates to 25 percent for large corporations (from 30 percent) retroactive July 1, 2020, thereby narrowing the gap with the tax rates in other Asean/Asian countries, and also provides greater certainty on investment incentives, thereby helping attract more FDIs and making some foreign investors on the sidelines in recent months/years to become more decisive and finally bring in more FDIs into the country,” he said.

Ricafort said positive credit rating actions on the Philippines, which even got its first-ever A-level credit rating, A-, from the Japan Credit Rating Agency (JCR) in June 2020, also boosted investors’ sentiment on the domestic economy.

The positive credit rating actions, he said, “reflect improved international investor confidence in the country, manifesting the country’s improved economic fundamentals, as well as the country’s attractive demographics.”

These factors are, however, expected to be countered by the still high number of coronavirus disease 2019 (Covid-19) cases, aggravated by new variants that are reported to be more contagious.

Ricafort believes that higher government spending, especially on infrastructure, and the accommodative monetary policy by the Bangko Sentral ng Pilipinas (BSP) are seen to further support the rise in net FDIs.

The above article is indeed filled with good news that our nation badly needs, especially since there are still many millions more people around the country who have yet to get vaccinated and the fact that lots of businesses are still struggling. In recent times, patients under the A4 category have been gradually vaccinated for COVID-19 and that is a very good thing because it under that very category where the nation’s laborers are listed. There are still lots of unemployed workers out there who badly need vaccines and jobs, and it does not help that certain local government units (LGUs) had to temporarily suspend their local vaccination operations due to a lack of supply of vaccines. There are supposed to be around 13 million doses of vaccines to come into the Philippines this month, and so far some of that have arrived (click here, here and here).

More on economics, apart from the rise of FDIs last April, it was reported that the local demand for office space nationwide grew by 38% rising from 122,000 square meters (sqm) in the first quarter of 2021 to 169,00 sqm. in the second quarter. It was described to be the strongest office demand since the start of the pandemic.

Let me end this piece by asking you readers: Does the recent news about the sharp rise of FDIs in our country make you confident about your economic prospects? How much do you know about the CREATE Law and what further positive effects it can generate for the country? If you have been unemployed, how long have you been out of work?

You may answer in the comments below. If you prefer to answer privately, you may do so by sending me a direct message online.

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Thank you for reading. If you find this article engaging, please click the like button below and also please consider sharing this article to others. If you are looking for a copywriter to create content for your special project or business, check out my services and my portfolio. Feel free to contact me as well. Also please feel free to visit my Facebook page Author Carlo Carrasco and follow me at HavenorFantasy@twitter.com

CREATE bill to boost Philippine economy by cutting corporate income tax and implementing incentives

CREATE bill to boost Philippine economy by cutting corporate income tax and implementing incentives

carlocarrasco

Yesterday, Department of Trade and Industry (DTI) Secretary Ramon Lopez announced that the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act is aimed to reduce the corporate income tax which should lead to creating more jobs as well as attracting investments.

Given the dramatic fall of the Philippine economy as a result of the COVID-19 pandemic, the CREATE bill could be the big solution to boost the economy and pave the way for recovery. For almost a year now, the said pandemic caused a lot of people to lose their jobs and much of their income. A lot of businesses closed down as well.

For your reference, here is a long excerpt of the news release about the said bill published via Philippine News Agency (PNA). Key words are highlighted in bold:

The recent bicameral approval of the game-changing CREATE Act can also provide a big boost to the National Employment Recovery Strategy (NERS) Task Force chaired by the DTI and co-chaired by the Department of Labor and Employment (DOLE) and the Technical Education and Skills Development Authority (TESDA), which was signed last Feb. 5 by several agencies.  

“The landmark tax and incentives reform bill that we expect to be signed by the President is expected to bring in (a) massive inflow of investments that will create more jobs, especially as we focus efforts in the National Employment Recovery during this period of the pandemic and beyond. The passing of CREATE will firm up the tax and incentive reforms that will make the investment climate significantly more attractive than the current tax and incentive regime,” Lopez said in a statement.

He said the bill will certainly encourage more investments with the lowering of the corporate income taxes rate from 30 percent to 20 percent for micro, small and medium enterprises (MSMEs), and 25 percent for large corporations.

“Modernizing the incentives system likewise makes the incentives such as income tax holiday (ITH), special corporate income tax rates (SCIT) or enhanced deductions (ED), available to industries considered strategic, critical or export oriented,” he added.

The Trade chief said the length of incentives, such as four to seven years of ITH plus five or 10 years of SCIT or ED, will depend on the nature of industry, export or domestic oriented, degree of technology and value adding, and geographical location, with additional years outside the Metro Manila and urban centers.

“There is also (a) longer transition period for those currently granted incentives. Thus, incentives are now made more performance-based, focused and timebound,” Lopez said.

CREATE is a bill certified urgent by President Rodrigo Roa Duterte upon the recommendation of the economic team led by Finance Secretary Carlos Dominguez III.

Lopez also thanked the legislators at the Senate and the House of Representatives, with Sen. Pia Cayetano and Rep. Joey Salceda, respectively, as principal authors, for the hard work of the committee members in bringing the CREATE bill to fruition.

“The passing of CREATE will unleash the growth potential of investments by removing uncertainties during the period that the bill was under deliberation,” Lopez said. “Based on our estimate and those from Cong. Joey Salceda, CREATE can bring in over PHP200 billion of new investments that can generate 1.4 (million) to 2 million incremental jobs.”

CREATE will help boost investments in the Philippines, which would support the 2021 target of the Board of Investments (BOI) of PHP1.25-trillion investment approvals.

A report by the United Nations Conference on Trade and Development (UNCTAD) had also estimated that the Philippines bucked the trend in Southeast Asia, and had increased its foreign direct investments (FDIs) during the pandemic by 29 percent last year.

Meanwhile, the NERS 2021-2023 is a medium-term plan anchored on the updated Philippine Development Plan 2017-2022 and ReCharge PH by expanding the Trabaho, Negosyo, Kabuhayan initiative and improving access and security of employment.

The strategy also takes into consideration the changes in the labor market brought about by the pandemic and the fast adoption of Fourth Industrial Revolution (FIRe) technologies.

“NERS shall also consolidate all measures, programs, and institutions that influence the demand and supply of labor, as well as the functioning of labor markets,” Lopez said.

Members of NERS Oversight Committee include the Departments of Transportation (DOTr), Tourism (DOT), Public Works and Highways (DPWH), Science and Technology (DOST), Social Welfare and Development (DSWD), Agriculture (DA), Agrarian Reform (DAR), Interior and Local Government (DILG), Information and Communications Technology (DICT),  Environment and Natural Resources (DENR), Education (DepEd), Commission on Higher Education (CHED), and National Security Council (NSC), as well as the Office of the Cabinet Secretary (OCS), Departments of Finance (DOF) and Budget and Management (DBM), and the National Economic and Development Authority (NEDA).

DOLE Secretary Silvestre Bello III said: “This JMC (joint memorandum circular) will fortify our collective undertaking as a Task Force working to develop a policy environment that encourages the generation of more employment opportunities, improves employability and productivity of workers, and supports existing and emerging businesses.”

Lopez further stressed the importance of continuing with the calibrated and safe reopening of the economy to allow the country to regain the growth momentum that it had before the pandemic. 

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Thank you for reading. If you find this post engaging, please click the like button below and also please consider sharing this article to others. If you are looking for a copywriter to create content for your special project or business, check out my services and my portfolio. Feel free to contact me as well. Also please feel free to visit my Facebook page Author Carlo Carrasco and follow me at HavenorFantasy@twitter.com